Foreign exchange markets in central Europe are set for another day of volatile trade Wednesday after the Hungarian central bank said it sees room for continued monetary easing.
Hungary’s central bank cut its headline interest rate to a record low of 3.60% from 3.80% Tuesday in a move to help revive the country’s stagnant economy ahead of parliamentary elections next spring.
The forint weakened by about 0.4% on the day following the decision Tuesday, and the Polish zloty weakened by about 0.3%. In early trade Wednesday, the forint and Czech koruna were both a tad weaker while the zloty is clawing back some of the previous day’s losses.
Despite tentative signs of an economic rebound in the region, inflation rates in Hungary, Poland and in the Czech Republic remain below levels targeted by respective central banks and in each country interest rates are at historic lows.
“With inflation below target and the economic recovery still fragile, it looks like the dovish monetary policy committee [in Budapest] will seek to ease policy as far as it can,” said Capital Economics economist William Jackson.
The Czechs are due to decide on monetary policy and any potential foreign exchange interventions Thursday.
In Ljubljana, Slovenia’s central bank Governor Bostjan Jazbec will address a seminar on the banking industry in his country and in the euro zone.
Slovenian state-owned banks, which dominate the country’s financial sector, are suffocating under about 7 billion euros ($9.44 billion) of bad loans, equal to about a fifth of the nation’s total economic output.
Efforts to clean up those banks’ balance sheets has stoked fears that the country may have to seek some form an international bailout, becoming the sixth euro-zone country needing assistance.

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CZECH REPUBLIC: Former Czech Prime Minister Petr Necas has married Jana Nagyova, the ex-top aide involved in an alleged bribery and power-abuse scandal that toppled his conservative government in June, local media reported Tuesday.
When Ms. Nagyova arrived at a downtown Prague police station for questioning Tuesday she introduced herself using the surname Necasova, Czech dailies Mlada Fronta Dnes and Hospodarske Noviny reported on their websites.
HUNGARY: Hungary’s Export-Import Bank Zrt. or Eximbank announced Tuesday that it issued EUR400 million ($540 million) worth of bonds, maturing Feb. 13, 2019. This is the second issuance under the company’s EUR2 billion international bond program set up Dec. 4, 2012. The previous issuance took place on Dec. 5 last year, worth $500 million.
HUNGARY: Hungary’s central bank Tuesday revised its inflation forecasts downward and raised its economic growth forecasts for this year and 2014 on the same day that it cut its policy rate to a new low.
The central bank lowered its forecast for annual average inflation next year to 2.4% from June’s forecast of 3.2%. Its view on this year’s inflation rate was little changed at 2.0% compared with 2.1% previously.
BULGARIA: The central banks of Ukraine and Bulgaria both added to their gold reserves in August, despite a sharp rise in the price of the metal.
Ukraine added 80,000 troy ounces of the metal to its official reserves last month, which now stand at 1.33 million ounces, according to data Tuesday from the International Monetary Fund.

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Emerging Europe Real Time provides sharp analysis and insight into what’s making news in Central and Eastern Europe. Drawing on the expertise of our reporters in the Czech Republic, Hungary, Poland, Russia and Turkey, the site provides an inside track on economics, politics and business in this emerging part of the European continent.